StockMarket Update on Petronet LNG for 1QFY2012 with a Neutral recommendation.
Petronet LNG’s (PLNG) 1QFY2012 net sales increased by 83.0% yoy to `4,623cr on the back of higher volumes and improved realisation. Net profit increased by 130.5% yoy to `257cr. We remain Neutral on the stock.
Robust volume growth and price increases drive sales growth: PLNG’s R-LNG increased by 39.6% yoy to 133.4TBTU mainly on account of higher spot and contracted volumes. Contractual volumes were higher on a yoy basis at 105.8TBTUs in 1QFY2012 as against 89.5TBTUs in 1QFY2011. The company’s utilisation reached 105% at its Dahej terminal during 1QFY2012. Also, average realisations improved by 32.0% yoy to `348/mmbtu. Hence, the company’s net sales increased by 83.0% yoy to `4,623cr.
Strong growth in EBITDA and net profit: EBITDA/mmbtu increased to `33.0 (+26.9% yoy) mainly on account of increased spot volumes, which have higher margins compared to contracted volumes. However, EBITDA margin declined marginally by 33bp yoy to 9.5% in 1QFY2012. EBITDA increased by 76.9% yoy to `438cr. Other income increased by 108.5% yoy to `26cr. Thus, net profit grew massively by 130.5% yoy to `257cr.
Outlook and valuation: For 1QFY2012, PLNG reported strong revenue and profit growth. However, the company’s capacity utilisation (105%) almost peaked in 1QFY2012, indicating a further increase in volume growth will remain capped in the near term. Nevertheless, demand for natural gas remains robust in India, while the domestic supply fails to meet the shortfall, thus boosting prospects for PLNG’s business. However, we believe the current rich valuations discount the robust growth prospects of PLNG. The stock is currently trading at 12.6x FY2012E and 11.5x FY2013E EPS. Hence, we maintain our Neutral view on the stock.
